Wednesday, August 07, 2013

...Another thing, what about numerical methods? Macro was totally taken
over by computer simulations. This liberated it (so that anything could
happen) but also ruined the fun. When computers were new and scary,
simulation based macro was scary and high status. When everyone can do it,
setting up a model and simulating just doesn't demonstrate brains as
effectively as finding one of the two or three special cases with closed
form solutions and then presenting them. Also simulating unrealistic models
is really pointless. People end up staring at the computer output and trying
to think up stories which explain what went on in the computer. If one is
reduced to that, one might as well look at real data. Models which can't be
solved don't clarify thought. Since they also don't fit the data, they are
really truly madly useless.

I might as well be honest. I am posting this here rather than at
rjwaldmann.blogspot.com , because I think it is the sort of thing to which
Mark Thoma links and my standing among the bears is based entirely on the
fact that Thoma occasionally links to me.

I think that Pigou, Samuelson, Solow and Friedman all assumed that the
marginal propensity to consume out of wealth must, on average, be higher for
nominal creditors than for nominal debtors. I think this is a gross error
which shows how the representative consumer (invented by Samuelson) had done
devastating damage already by 1960.

Comments

...Another thing, what about numerical methods? Macro was totally taken
over by computer simulations. This liberated it (so that anything could
happen) but also ruined the fun. When computers were new and scary,
simulation based macro was scary and high status. When everyone can do it,
setting up a model and simulating just doesn't demonstrate brains as
effectively as finding one of the two or three special cases with closed
form solutions and then presenting them. Also simulating unrealistic models
is really pointless. People end up staring at the computer output and trying
to think up stories which explain what went on in the computer. If one is
reduced to that, one might as well look at real data. Models which can't be
solved don't clarify thought. Since they also don't fit the data, they are
really truly madly useless.

I might as well be honest. I am posting this here rather than at
rjwaldmann.blogspot.com , because I think it is the sort of thing to which
Mark Thoma links and my standing among the bears is based entirely on the
fact that Thoma occasionally links to me.

I think that Pigou, Samuelson, Solow and Friedman all assumed that the
marginal propensity to consume out of wealth must, on average, be higher for
nominal creditors than for nominal debtors. I think this is a gross error
which shows how the representative consumer (invented by Samuelson) had done
devastating damage already by 1960.